Ivanhoe Mines, Ltd. (OTCMKTS:IVPAF) Looking For ‘Strategic Advice’ – Where Will the Stock Go From Here?

September 20, 2016Gregory Miller

Ivanhoe Mines, Ltd. (OTCMKTS:IVPAF) recently announced that it will reach out for “strategic advice” upon receiving unsolicited interest in the company from “significant mining industry participants” throughout the world.

Ivanhoe Mines Ltd. announced Monday it will seek “strategic advice” after receiving unsolicited interest in the company and its projects from “significant mining industry participants” in Asia, Europe and Africa.

The Vancouver-based copper miner, which has a market value of $1.42 billion, said it will likely hire an investment bank to advise its board on strategic options, including alternatives to any offers.

“It’s been our view all along that Ivanhoe has world class assets,” said Alex Terentiew, an analyst at Raymond James, in an interview. “But many companies get interest — we’ve been hearing for years that there is private equity wanting to buy stuff and it rarely happens, in part because the valuation is often too low. On the other hand, the market has been in downturn for years, so if we’re not at the bottom we’re pretty close and that could be encouraging for deals, if not more partnerships on projects.”

Earlier this month, Ivanhoe trumpeted that its Kakula discovery, a major extension of the Kamoa copper deposit within its mining license area in the Democratic Republic of Congo, “could prove to be Africa’s most significant copper discovery.” Ivanhoe’s Kamoa project, which is expected to begin production in late 2018, is believed to be the world’s largest undeveloped high-grade copper deposit.

Ivanhoe also announced plans for an independent mineral resource assessment for the Kakula discovery sometime around the end of the third quarter.

The Kamoa copper project has been a joint venture with Xiamen, China-based Zijin Mining Group Co. since December.

Last year, Ivanhoe sold a 49.5 per cent stake in Kamoa Holding Ltd., which holds a roughly 95 per cent stake in the Kamoa Project, to Zijin for US$412 million.

The additional five per cent has been held by the DRC government as a non-dilutable interest since 2012, in accordance with the DRC Mining Code. Ivanhoe is also expected to transfer an additional 15 per cent interest to the DRC government, with terms still to be negotiated.

“The mining industry has taken notice of our company,” said Robert Friedland, Ivanhoe’s executive chairman, in a statement.

“Our remarkable Kakula Discovery on the Central African Copperbelt certainly is helping to generate attention. We have received a number of unsolicited inquiries from significant mining industry participants in Asia, Europe, Africa and elsewhere. In response, our board has taken the prudent decision to seek strategic advice.”

Ivanhoe also announced Monday that is has begun investor and banking analyst tours of its projects, Kakula among them.

“It is important for analysts and investors to gain a first-hand understanding of the progress and potential of our project offering and to see the scale of the Kakula Discovery,“ said Ivanhoe chief executive CEO Lars-Eric Johansson. “Following this, we can obtain strategic advice and make informed decisions that benefit our shareholders and the other governmental, community and local stakeholders in our projects.”

Ivanhoe owns two additional major projects in sub-Saharan Africa: the Platreef platinum-palladium-gold-nickel-copper discovery in South Africa and the upgrading and exploration of the Kipushi zinc-copper-lead-germanium mine in the DRC.

Ivanhoe’s shares on the TSX soared 20 cents, or 12 per cent, to $1.87 in the afternoon following the news.

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Potential investors in Ivanhoe Mines, Ltd. (OTCMKTS:IVPAF) should be looking at the current and historical short data in order to get a glimpse of where the market believes the stock might be headed. According to the most recent information, there are 2066900 total short interest. Given the stock’s average daily volume of 270024, this results in 3.9 days to cover. In looking at the total shares short in respect to the total outstanding share total of 775510000, yields a 0.00267% of total shares that are short. Compared to last month, this is a 42.06 change in total short interest.

When investors engage in short selling or “shorting a stock”, they actually borrow shares from an existing owner, sell the borrowed shares at market price, and take the cash. The short sellers then promise to replace the stock in the future and makes dividend payments out of their own pockets to cover the dividend income that is no longer exists on the original, now borrowed and sold, shares.

They hope that the stock price will fall or that the company will fail and go bankrupt, leading the equity holders to ruin. The short sellers will then buy the stock back at a much lower price and replace the borrowed shares, pocketing the difference.

Shorting a stock can be very risky if the price doesn’t decline like planned and, in fact, increases. It’s important for any investor to understand the dangers and potentially catastrophic financial losses of short selling.

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Ivanhoe Mines, Ltd. (OTCMKTS:IVPAF) shares closed the most recent session at $1.43, moving from the previous open of $0.01. This is compared to the stock’s 52-week high of 1.69 and 52-week low of 0.36. Is now the right time to take stake in the 1100000000 market cap company?

Disclaimer: The views, opinions, and information expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any company stakeholders, financial professionals, or analysts. Examples of analysis performed within this article are only examples. They should not be utilized to make stock portfolio or financial decisions as they are based only on limited and open source information. Assumptions made within the analysis are not reflective of the position of any analysts or financial professionals.